Merging the BIF and the SAIF: Would a merger improve the Fund's viablity?

Increased Concentration in Banking: Megabanks and Their Implications for Deposit Insurance

“…Results from Oshinsky (1999a), for example, show that the probability of a BIF insolvency does not significantly decrease even with a reserve ratio as high as 1.40% of insured deposits. In a separate study, Oshinsky (1999b) found a similar lack of improvement when he examined the prospects of merging the BIF and the Savings Association Insurance Fund (SAIF) 34 . The probability of insolvency for the combined fund, for example, was 6.2%, compared with 6.5% for the BIF alone.…”

“…23 23 The KSW credit risk model and simulations differ significantly from the dynamic studies that are now being discussed in that KSW employ a static model that evaluates fund adequacy for only one period rather than the 50‐year periods simulated by Sheehan (1998) and Oshinsky (1999a, 1999b). …”

Increased Concentration in Banking: Megabanks and Their Implications for Deposit Insurance

“…If Washington Mutual were to be excluded, then HSBC Holdings, PLC (with $98 billion in assets and $45 billion in domestic deposits) would round out the top ten commercial bank organizations. 7 Oshinsky (1999a). 8 FDIC (1998).…”

“…Taking a more dynamic approach, Sheehan (1998) conducted a Monte Carlo simulation to estimate the time series behavior of disbursements from the BIF and the likelihood of insolvency across a number of fund reserve ratios and assessment rates. 23 Source: FDIC, Call Reports, data as of 12/31/2003 23 The KSW credit risk model and simulations differ significantly from the dynamic studies that are now being discussed in that KSW employ a static model that evaluates fund adequacy for only one period rather than the 50-year periods simulated by Sheehan (1998) and Oshinsky (1999aOshinsky ( , 1999b).…”

“…Sheehan acknowledged, however, that his analysis did not capture the effect of consolidation after 1996-a critical point, since the latter part of the decade was precisely when many megabank mergers occurred. Fortunately, a follow-up study by Oshinsky (1999a) looked specifically at the effects of bank consolidation on the BIF. Like Sheehan (1998), Oshinsky used Monte Carlo simulations to test for BIF insolvency under a variety of economic conditions and failure assumptions.…”